THE CONTROL OF TRUSTS 233
dominant corporation, in its haste to end the process which must lead to a trust anyway, may give to the smaller competitors so large a share of the stock of the new company that the financial strength of the latter may be lowered by the necessity of earning dividends on capital stock represented by worthless plants. A stronger monopoly may sometimes be formed by allowing competition to run a little longer, when the weaker competitors will be wholly eliminated, and a conflict with the anti-trust laws avoided. Under the second condition — ruinous competition among producers of appro.ximately equal strength — combination is as clearly secondary to competition as in the case just considered. Manifestly, two competing companies would not organize if each did not expect to gain by the compe- tition. With a rapidly expanding demand, competition between these companies may be practically eliminated. The price of the product may be run up as high as the upper marginal demand, and still both plants may be fully occupied. But if the market is limited and the two producers actually begin to com- pete with each other, one must sooner or later gain the ascend- ancy, though both may be seriously injured in the conflict. If, then, a modus vivendi is reached before the actual trial of strength has come, combination is but slightly anticipating the outcome of competition. While the social loss from the destruction of small competing plants is small, that from the destruction of one of two large, evenly matched concerns, like the Carnegie and Illinois steel companies, would be almost beyond computa- tion. To avoid such disaster combinations are frequently formed even before any serious effects of competition are felt ; or, before either party is pushed to the wall, an agreement is reached, as in the case of railway pools. Such monopolies being the natural result of our competitive system, it does not seem that the law should interfere with the peaceable measures which moderate the last stages of the conflict."
■Another class of combinations — that which results in the absorption of compa- nies which are started with the express purpose of being absorbed-- requires no atten- tion here. It is, of course, the possibility of damage to the older company, not the question of the extinction of the new one by competition, that enters into con- sideration.
